Category Archives: Free Courses

Warren Buffett: Liquidator to Operator

Dempster Mills

Dempster Mills Case Study:

Dempster_Mills_Manufacturing_Case_Study_BPLs  Note the difference in strategy between Buffett and Graham in this type of investment.

As previously discussed, we have read the Preface and Chapter 2, Contrarians at the Gate in Deep Value where we learned about Graham and liquidations and the great mean-reverting mystery of value investment. Klarman’s writings were also read (Margin of Safety) to learn about his approach to liquidation and valuation. Valuation is an imprecise art where value is no one precise number.  Finally, Mr. Market is there to serve us not guide us. Therefore, think of all the pundits, experts, and CNBC commentators we can ignore for the rest of our investing careers.

If readers have questions or comments, do not hesitate to write. I try not to look at my emails but once a week. I neither have a cell phone nor a TV, but time is scarce so I can respond faster (or another student can to your questions) here in the comments section.

Now we transition into reading Chapter 3 of Deep Value, “Warren Buffett: Liquidator to Operator.”  Buffett was Graham’s prized student who forged his own way.   There are about ten books written on Buffett every year. We will now focus on his early career by going through his Complete_Buffett_partnership_letters-1957-70_in Sections

After Dempster, we will study Sanborn Map and then See’s Candies. Put on your thinking caps.   Go the extra mile and find out more about these companies if you have the interest.   Focus on how Buffett estimated the intrinsic value of Dempster Mills AND how he managed the investment over time.   What made up his margin of safety BESIDES the price discount?

Reader Question:   Do I know Toby Carlisle, and do I think his approach works?

Yes, I have had the pleasure of meeting Toby. A nice guy who seems like a Renaissance man similar to Graham but with a darker sense of humor. Toby taught me how to speak Australian English.   You don’t thank your host for a delicious meal by saying, “That was excellent.!”   You say, “What a belly-bust!”   You don’t go out to drink beers, you go out to “rip down a frosty.”  I am indebted for those tips.  I learned during my working days in Cairns, Australia that fly-crawling was the national sport.  If you could choose which fly could crawl the furthest along a wall or ceiling, you were the champ.  The game had a huge element of randomness. I digress…

Since we haven’t finished our course of study on Deep Value Investing, I am no expert to comment upon his approach. But Deep Value investing can work since it does the opposite of a naive strategy. Hard-core contrarian-investing is difficult because buying what has been losing or is obscure, despised, and loathed goes against human nature.  Are you more attracted to go into a full restaurant than one with cobwebs across the window?   So far in our readings, net/nets seem more likely to be small, illiquid securities, so the investing approach may be more suited for individuals with a limited amount of capital who can go anywhere to find bargains.

Even the great Walter Schloss managed small amounts of money using his deep value approach. As his accounts grew, he would return capital to his partners, thus keeping the amounts of money he managed appropriate for the illiquidity of the names he bought and sold.  He would also buy and sell scale down and up, I heard.

Why don’t you call him at his firm, Eyquem Investment Management LLC or visit and find his email address. Ask for his record so far in managing accounts.  What happens when there are only six or seven net/nets–does he concentrate into those?

-Are my instructions clear?

Addendum: Does Intuition Have a Role in Quantitative Investing?

TIME OUT: Franchise Investing (Pat Dorsey)

Thanks to

Slides here:pat-dorsey-talks-at-google

A franchise-type company does not often become a distressed, deep value investment. But since we will next be discussing Buffett and his development from cigar-butt investing to buying See’s Candies, I thought a review of franchises by this money manager would interest you.

One mistake investors make is confusing an average company with a franchise. Not to pick on anyone but when Monish Pabrai said Pinnacle Airlines had a moat due to the type of aircraft the airline was flying or Excide Batteries had a brand, he thought he was investing in a franchise. Yes, Excide batteries may be well-known but it doesn’t change a consumer’s behavior.

DEEP VALUE Videos on Net/Nets and Investing

Closing Arg

How is it possible that an issue with the splendid records of Tonopah Mining should sell at less than the company’s cash assets alone? Three explanations of this strange situation may be given. The company’s rich mines at Tonopah are known to be virtually exhausted. At the same time the strenuous efforts of the Exploration Department to develop new properties have met with but indifferent success. Finally, the drop in the price of silver last year has provided another bearish argument. It is this combination of unfavorable factors which has carried the price down from $7  1/8 in 1917 to its present low of $1  3/8 in 1923.

Granting that the operating outlook is uncertain, one must still marvel at the triumph of pessimism which refused to value the issue at even the amount of its cash and marketable investments; particularly since there is every reason to believe that the company’s holdings in the Tonopah and Goldfield railroad, are themselves intrinsically worth the present selling price. (Ben Graham on Investing)


Marty Whitman criticizes Graham and Net Nets (3 minutes Must see!)

Marty Whitman: They Just Don’t Get it.  (23 minutes) Marty says many analysts on Wall Street do not understand credit analysis.   We will explore later in this course whether the quality of credit provides a better assessment of the true cost of capital for a firm rather than “beta.”

One investor’s experience investing in Net/Nets (3 minutes)

Net/nets as value traps (5 minutes)

Good advice on behavioral investing (3.5 minutes)

Prof. Greenwald on UGLY and Cheap or Graham’s Search Strategy (8 minutes)

Greenwald on the Balance Sheet (risk of financials) (10 minutes)

Deep Value Group at Google


With about 500 “students” enrolled, emailing individually is difficult because of limits to prevent spam. I started a DEEP VALUE group (in  communities) at Google.    Click on the link below (if you haven’t already joined–I sent out an invite to all my distribution list this morning).  You may be required to have a Gmail account, but that is an easy process.  Then you can keep your course work separate from your usual emails.

I will be communicating via emails with this DEEP VALUE group as well as posting here.  If you decide not to join the group, you can still email questions/comments to me at!overview then type: DEEP-VALUE and ask to join.

Lecture 1; Lesson 2: A DEEP Value Investor/Activist in Action


Lecture 1 The main points from Lesson 1

Jot down his numbers. Do you agree?  Read through the transcript Other Peoples Money_2 then see the video again.  What you saw was value investing in action.  Many of my videos are meant to entertain but this one has much to teach. Note his SEARCH and VALUATION PROCESS.

Now view the activist. Note the divergent incentives.

A Prayer   (Video link) What do YOU think?

A Prayer for the Dead. Amen, Amen, and Amen.

For Masters of the Universe (Investment Bankers)

Try this case study. Case Study – Munsingwear.  If you struggle, here is a hint: What would you tell someone who kept banging their head on the wall and complained of a headache?  In five days I will post the answer. This is an actual case so don’t cheat by Googling it.  This case is about thinking like Larry the Liquidator :).

Next week, I will post more on Lecture 1 and you should plan to read Chapter two in DEEP VALUE and the Chapters 1 & 2 in Quantitative Value. We will study those chapters AFTER next week. I am just giving you notice.


Dangerfield in a Finance Class/Search Strategy


Why do the typical MBA classes teach Beta, Capital Asset Pricing Theory, Value at Risk? Do those terms and theories have anything to do with REAL investing?  What would Graham say about the typical MBA finance class?  We will delve into those terms in another reading (Discussed in Montier’s book, Value Investing–which was emailed to YOU.)

If you wish to take MBA-level finance courses for free go here:

The next link contains an offensive video about picking-up women (please, those of sensitive dispositions ignore/delete). However, there is a lesson here for deep value investors–a hint of where to look for value.  In places where other investors are experiencing anguish. Video: Deep Value Search Strategy

Tomorrow/Saturday I will post the lecture notes for Lesson 1. Then we will view a Deep Value Activist in action.

You may enjoy reading an interview of Deep Value’s author

Deep Value Author, Tobias Carlisle-interview-with-harvest-and-its-community

Deep-Value-at-authorsgoogle/ An excellent video of Deep Value Investing. is worth scrolling though and viewing past videos.

Prayer for a Deep Value Investor; Special Project (Montier Reading)


If— A poem Phil Fisher kept by his bedside to emphasize independence of spirit and rationality/grace under pressure.


If you can keep your head when all about you

    Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
    But make allowance for their doubting too;
If you can wait and not be tired by waiting,
    Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
    And yet don’t look too good, nor talk too wise:
If you can dream—and not make dreams your master;
    If you can think—and not make thoughts your aim;
If you can meet with Triumph and Disaster
    And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
    Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
    And stoop and build ’em up with worn-out tools:
If you can make one heap of all your winnings
    And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
    And never breathe a word about your loss;
If you can force your heart and nerve and sinew
    To serve your turn long after they are gone,
And so hold on when there is nothing in you
    Except the Will which says to them: ‘Hold on!’
If you can talk with crowds and keep your virtue,
    Or walk with Kings—nor lose the common touch,
If neither foes nor loving friends can hurt you,
    If all men count with you, but none too much;
If you can fill the unforgiving minute
    With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
    And—which is more—you’ll be a Man, my son!
You should have received Value Investing by Montier (attachment in the email)  If YOU did NOT, then check your spam filter or email me at
Volunteer(s) (especially a CFA or MBA) to read and discuss via a post with links PART 1: WHY EVERYTHING YOU LEARNED IN BUSINESS SCHOOL IS WRONG   (pages 1 – 72).  I will discuss the details to cover later.
PS: The questions posted for reading Lesson one (1) are to help YOU in understanding/questioning the reading. You do NOT have to send to me unless you want to or you can post to the blogs’ comments’ section with your comments/additional thoughts.  If you disagree or have another perspective on what you have read then do not hesitate to share.  Deep Value Investors tend to be contrarian/iconoclastic.

Questions on the Readings (Lesson 1, Deep Value)

Contrariwise, if it was so, it might be; and if it were so, it would be; but as it isn’t, it ain’t. That’s logic.
~ Lewis Carroll

When dealing with people, remember you are not dealing with creatures of logic, but creatures of emotion.
~ Dale Carnegie

Mastering others is strength. Mastering yourself is true power.
~ Lao Tzu

Your goal should be to find an investment approach that works for you.  You will need to determine your investment edge.

You should read:

the Preface from Deep Value (Toby Carlisle)

Chapter 20_Margin of Safety Concept

Buffett Klarman and Graham on Mr Market

Behavioral Portfolio Management

Questions from the readings:

  • Do you agree that deep value investing is an investment triumph disguised as business disaster?
  • What do you see as the biggest investment risk(s) in “deep value investing?”
  • When do stocks appear most attractive and when is the risk highest?
  • What is considered the main margin of safety metric?
  • What are investors rewarded for?
  • What concept must you truly grasp to be a successful deep value investor?
  • Why do prices move more than intrinsic value?
  • True or False: A good value investor understands and takes advantage of the behavioral biases of others because he has already eliminated them in him/herself?
  • Deep value investing often means buying distressed assets but can you buy a franchise (see attachment of Wal-Mart or a company able to grow with profits above its cost of capital due to barriers to entry) at deep value prices? Name two investments by Buffett that might fit that criteria? WMT_50 Year SRC Chart
  • How can we think of activist investing?
  • What are your goals for this course?
  • How do Mr. Graham and Mr. Buffett view buying a share of stock?
  •  What do you do if you can’t find an attractive investment?
  • What is Mr. Market’s purpose?
  • How are prices set? in Philadelphia it’s worth fifty Bucks (video)
  • Are prices based on subjective or objective valuation?
  • If you are playing poker and you don’t know who the sucker is—why is that a problem?  Who’s the sucker? Playing the sucker  (video) What EMOTIONAL error did the SUCKER display? When did the sucker CEASE to be a sucker?   What is the main error–man, especially male, beginning investors—exhibit?
  • What is the key to investment success?
  • What TYPE of market participant seeks Mr. Market for investment guidance?  Do you notice any conflicts, ironies or problems?   Or can it be a way to improve your investment results?
  • How do many investors react to huge market volatility?
  • Did Mr. Graham give you a way to access the valuation of a common stock? Explain.
  • Extra credit: Did Graham ever give a FORMULA for determining intrinsic value?  Be careful and read the footnotes to the formula he presents and why he offers it to readers. See Intelligent Investor.
  • What is the biggest mistake investors make when buying securities? How would you prevent that? What does Graham do?
  • What is the danger in growth stock investing?
  • What is a good or bad stock/investment?
  • When during the past fifty years were the greatest American companies (Franchises mostly) bad investments. Why?
  •  What is the best approach to take in investing.
  •  What is risk?
  • Why do so many “smart” people fail at investing or at least do less well than simple stock indexes over time?

You can email me at with LESSON 1 in the title with questions and answers or post here in the comments section. If you don’t have time or wish to pass then come back to this lesson later.

  • What are the five investment criteria in the Behavioral Portfolio Management? 
  • What is the cult of emotion?
  • Is it possible for emotion to help you as an investor?

I will be asking for one or two volunteers who wish to research the article BEHAVIORAL PORTFOLIO MANAGEMENT.   You will need to read the articles below and then determine if the author’s five criteria will work.   Over this course, I will probably assign twenty or so special projects. Then we will share your work/efforts.

SSRN_Behavioral Measures of Expected Market Return

SSRN The Importance of Investment Strategy_Howard

SSRN Behavioral Portfolio Management_Thomas


Making Money Out of Emotions   How investors fail because of their own brain.  Solution: Pre-program your portfolio.

I will post the review of the lesson/readings by the end of the week. There will be supplementary material posted throughout the week.   You will also be emailed any postings.

Going DEEP into Deep Value (Course on Value Investing)

Deep value cover

My Idea:

This is an experiment to see if a group of serious students of value investing can learn from each other and an in-depth reading of the course materials to become better investors.   If you send me your email to (DEEP VALUE COURSE) in the title, I will send you the course materials (Thanks to a reader for contributing!).   There is a catch however. You are expected to do the readings and comment/participate in the discussion in the comments section. So don’t seek unless committed to being an active participant. Since there will be supplementary readings for each chapter of the book (see chapter titles below), we will take one to two weeks per chapter.  You may have homework or be asked to research investment questions further.   I won’t think any less of you if you decide to pass–this course is only for fanatics.  Course will start a week or two into the New Year. 

Description of the book below (also type in DEEP VALUE) in the search box of this box and view some of the videos on deep value and the author, Toby Carlisle. Also, go to and look at the past ten posts.

Book blurb from Wiley:

Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations is a must-read exploration of deep value investment strategy, describing the evolution of the theories of valuation and shareholder activism from Graham to Icahn and beyond. The book combines engaging anecdotes with industry research to illustrate the principles and methods of this complex strategy, and explains the reasoning behind seemingly incomprehensible activist maneuvers. Written by an active value investor, Deep Value provides an insider’s perspective on shareholder activist strategies in a format accessible to both professional investors and laypeople.

The Deep Value investment philosophy as described by Graham initially identified targets by their discount to liquidation value. This approach was extremely effective, but those opportunities are few and far between in the modern market, forcing activists to adapt. Current activists assess value from a much broader palate, and exploit a much wider range of tools to achieve their goals. Deep Value enumerates and expands upon the resources and strategies available to value investors today, and describes how the economic climate is allowing value investing to re-emerge. Topics include:

  • Target identification, and determining the most advantageous ends
  • Strategies and tactics of effective activism
  • Unseating management and fomenting change
  • Eyeing conditions for the next M&A boom

Table of Contents

Chapter 1 The Icahn Manifesto 1

Chapter 2 Contrarians at the Gate 19

Chapter 3 Warren Buffett: Liquidator to Operator 35

Chapter 4 The Acquirer’s Multiple 53

Chapter 5 A Clockwork Market 77

Chapter 6 Trading in Glamour: The Conglomerate Era 99

Chapter 7 Catch a Falling Knife 119

Chapter 8 The Art of the Corporate Raid 151

Chapter 9 How Hannibal Profits From His Victories 169

Chapter 10 Applied Deep Value 187

Value Investing Series Seminar (Free) This Saturday


If you are free Saturday then check this out:

From my friend, Toby Carlisle, of Deep Value Investing Fame.